It’s a hard time to be an SSP.
The ad tech ecosystem incentivizes publishers to drive up their bid density by working with many different SSPs, making it harder for SSPs to offer buyers exclusive access to publisher inventory.
And, outside of the major sell-side platforms, most SSPs are seen by publishers as interchangeable pipes to the buy-side, with little to distinguish them in terms of offerings or unique demand sources.
The push for exclusive demand has led Magnite and PubMatic to work more closely with the buy side, with both companies launching direct sales solutions this year. But as SSPs and DSPs increasingly converge in the middle of the programmatic supply chain, other SSPs, such as Index Exchange, think their best bet is to double down on servicing the sell side only.
Meanwhile, content curation, proprietary ad formats and flexible pricing models are also emerging as offerings that can set SSPs apart.
AdExchanger spoke to SSPs to get an idea of how they’re differentiating themselves and asked publishers for their perspective on how SSPs can stand out from competitors.
A crowded market
The SSP market became crowded and commoditized because ad tech rewards publishers that work with many different SSPs.
Since most DSPs were built before the introduction of header bidding, they tend to allocate more spend to publishers that send them large volumes of bid requests, said Jounce Media Founder Chris Kane. That means publishers are financially rewarded for having many SSPs run auctions for their inventory and resell their impressions.
Publishers used to have an incentive to limit the amount of SSPs integrated into their stack because having many different SSPs active on the page can cause sites to load slowly. But as ad server technology has evolved, latency from processing bid requests has become less of a concern, said Samuel Youn, VP of programmatic at Chegg.
These factors and others have contributed to the size of publisher ads.txt files tripling between 2020 and 2022, according to Jounce, with the average publisher working with about 25 SSPs.
SPO-driven competition and consolidation
Until recently, SSPs weren’t worried about consolidation in the market because the channel wasn’t mature enough, Youn said. Instead, companies figured if they could get their code active on enough publisher pages and hit a 5% win rate, they could make money.
But SSPs are falling under more scrutiny because of a growing buy-side focus on supply-path optimization (SPO), which seeks to cut out unnecessary hops in the supply chain. SSPs are often singled out as adding costs and carbon emissions as they buy and resell publisher ad inventory on the open market.
And DSPs, like The Trade Desk and GroupM, are bypassing SSPs altogether as they forge direct integrations with publishers.
With all these issues compounding, the SSP market is moving toward consolidation.
Yahoo shut down its SSP earlier this year, claiming it didn’t see a viable path toward building a successful sell-side platform and choosing to focus on the buy side instead. EMX declared bankruptcy after months of missed payments to its clients, racking up $50 million in debt.
But these dynamics aren’t unique to the SSP space, said Kyle Dozeman, PubMatic’s CRO for the Americas. Consolidation is simply the inevitable result of a channel maturing over time.
“Yahoo SSP or EMX closing, that’s not much different than Dataxu getting sold to Roku for change on the dollar or Amobee being sold,” Dozeman said. “Those are the same headlines, just with a different acronym – DSP instead of SSP – behind them.”
The end-to-end solution
Increased consolidation among both SSPs and DSPs is causing the supply chain to blend in the middle. Players that have traditionally served only buyers or sellers are launching end-to-end solutions to maintain their competitive edge.
In response to DSPs forging more direct connections with publishers, SSPs are also crossing over, with Magnite’s ClearLine and PubMatic’s Activate offering direct buying platforms for CTV and video.
Rather than a few dominant buy-side and sell-side players emerging, it seems the future of ad tech will more closely resemble Google’s end-to-end walled garden model.
But not all SSPs are on board with the idea of cutting out DSPs and working closely with buyers. Index Exchange president and CEO Andrew Casale wrote an open letter to DSPs promising to never disintermediate them from the supply chain or build an end-to-end platform.
In that sense, Index is looking to distinguish itself by reaffirming its commitment to the traditional SSP business model.
“We don’t think [pursuing direct transactions with the buy side] is necessary to demonstrate our value, to drive the market to more efficiency or to consolidate this market to its end state,” Casale told AdExchanger.
In fact, Casale said the trend of consolidation in the middle of the marketplace could lead to the return of the bad old days of ad networks whose attempts to service both sides only ended up benefiting themselves. “Most [ad networks] had sizable conflicts of interests that were largely benefiting their margins,” he said.
But Index’s strategy has its critics.
“Every ad tech company has to be a two-sided platform,” Jounce’s Kane said. “The letter that Index put out seems like shooting yourself in the foot. That is clearly not the direction of change in the industry, and it severely limited their options to make the moves they’re going to need to make over the next couple of years.”
Although OpenX hasn’t offered the type of direct buying solution Magnite and PubMatic have, OpenX’s SVP of product Mike Chowla agrees that SSPs have to get serious about serving buyers if they want to improve their offering for publishers.
“If you’re not working with the buy side in some capacity, you’re not going to understand what technical tools you need to build so that they can more effectively buy inventory,” he said.
Tech innovation and unique demand
Creating direct partnerships with brands and agencies is an obvious way for SSPs to offer publishers more direct access to exclusive demand sources. But it isn’t the only way.
Developing unique ad formats is also an effective way to bring publishers unique demand from advertisers looking to buy those formats, said Emry Downinghall, SVP of programmatic revenue and strategy at Unwind Media. He pointed to TripleLift’s specialization in native ad placements and Kargo’s proprietary mobile ad formats as offerings that have set them apart.
Sell-side content curation – the practice of applying targeting data within SSPs to package ad inventory across publishers into private marketplaces (PMPs) specifically tailored to the advertiser’s needs – can also make a publisher’s inventory more attractive to buyers and increase demand, Downinghall said.
And SSPs can expand their market share by focusing on where demand is highest, like CTV. For example, Cadent decided to acquire EMX’s SSP tech to improve its end-to-end platform’s CTV capabilities and its sell-side curation tech.
This type of tech innovation is much more valuable for SSPs than pursuing SPO deals like direct partnerships with buyers, said Drew Stein, CEO at Audigent.
“When you don’t have technology to differentiate your inventory, the differentiator becomes price,” Stein said. “And when you have an ecosystem of competitors all pushing SPO deals, you’re going to have overall downward pressure on pricing.”
When SSPs get into a race to the bottom on pricing by solely pushing SPO, they end up commoditizing themselves, Stein added. “The ones that are balancing product innovation and price are the ones that are winning in the marketplace right now.”
But rethinking their own pricing models is another way for SSPs to stand out, Downinghall said. He said we might see more SSPs considering software-as-a-service (SaaS) models or even 0% take rates for open market demand going forward.
Update 5/16/23: An earlier version of this story quoted Index Exchange president and CEO Andrew Casale as saying “We don’t think [working with the buy side] is necessary to demonstrate our value, to drive the market to more efficiency or to consolidate this market to its end state.” Casale was specifically referring to Index Exchange pursuing direct deals with buyers, not working with buyers in general. The quote has been updated.
